Fatwa: # 44365
Category: Business Matters
Country:
Date: 19th March 2020

Title

Questions related to the 401K

Question

Asalam u Alaikum, Alhumdolila I have just changed jobs recently, but I am having trouble in selecting a 401k plan. In my previous Job, someone had recoomended that I put my funds in an "aggressive" account as that is sharia compliant (As far as I know). However, my current place does not have that option. I am aware that we cannot invest in any type of bonds. I have a few options that are not invested in Bonds, but they are a blend of companies. Such as Tech companies along with 30+ other companies. However, in the breakdown of funds allocation, they all show some percentage going into "Financial Services". I am not sure what to do, if I'm allowed to put my 401k in these funds or not. The company I work for matches has a good match % so I don't want to lose that money (ofc if it's not jaiz, then np).

Here are the blended options I found which have no bonds, maybe these will help:

1.) international Equity Index Fund

2.) Emerging Markets Index Fund

3.) U.S. Mid/Small Cap Equity Index Fund

4.) U.S. Large Cap Equity Index Fund

5.) Kraft Heinz Stock Fund

 

Q1.) Can I invest in any of these funds?

Q2.) If I cannot, is there an alternative solution to have a halal 401k since it's all pre tax

Q3.) What Can I do with my 401K from my previous company?

 

JazakAllah for your help

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Brother in Islam,

In order for us to advise you further, we require more clarity on certain issues:

1)    Does the company give you the option of investing the 401K into the employer’s(company’s) stock?

2)    Does the company give you the option of investing the 401K into individual stocks instead of index funds?

3)    Have you spoke to your HR department about the lack of options here?

You may respond to admin@daruliftaa.net Ref Mahmood Suliman.

And Allah Ta’āla Knows Best

Mahmood Suliman

Student Darul Iftaa
Gaborone, Botswana

Checked and Approved by,
Mufti Ebrahim Desai.

 

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